Employees

Non Compete Clauses and Team Transfers.

Post termination restrictions

An employment contract for a key employee may contain a series
of post termination restrictions. These often set out what the
employee cannot do for a specified duration after the employment
has ended. Typical clauses will seek to (i) prevent a key employee
working for a competitor; (ii) solicit a client or potential
client; (iii) poach other key employees; or (iv) interfere with
supplier relationships.

The purpose of a post termination restriction is to protect a
legitimate business interest such as confidential information or a
client relationship but cannot go so far as to amount to a
restraint of trade.

Enforceable?

Whether a post termination restriction is enforceable often
depends upon how reasonably it is drafted. For example, most
businesses would not require a restriction to last longer than it
would take to employ a new employee into the role of the departed
employee and to establish a new client relationship. The shorter
the restriction the more likely it is to be held to be enforceable.
Six months to one year are often found to be enforceable for senior
management positions. Also, a non-compete clause should be limited
to the geographical area of the business. If a hairdressing
business located in Brighton had an area restriction covering the
South East of England, it is likely to be found to be
unenforceable. Legal advice should be sought to determine whether a
particular restriction is likely to be enforceable because this
will often depend upon the circumstances and a range of
factors.

Breaches during employment

Employees considering setting up their own business in
competition with their employer or employees considering moving to
a competitor should seek specific legal advice because any steps
takenduringthe employment (for example, registering a limited
company or discussions between employees during a potential team
move) may be construed by the employer as a breach of the
employment contract. This might be especially important for senior
managers or directors when they owe a fiduciary duty to the
employer in addition to any specific contractual clause prohibiting
working in competition during the employment relationship.

Evidence of a breach or a potential breach

Breaches of the existing contract of employment may be easier
for an employer to enforce than any post termination restriction
and evidence of a breach can be discovered from company mobile
phones, photocopiers, information on social media websites, other
employees whistle-blowing, email trails, waste bins, laptops or
iPads, sending information to a personal email account, accessing
company server information from home, plugging in a memory stick
into your work computer, uploading or downloading company
information by whatever means, taking photos of confidential
information or customer lists on a phone or camera, faxes,
scanning documents, dictation, making a hand written note etc.

Undertakings

Once an employer discovers a potential breach of contract (which
may require no more evidence than an employee blowing the whistle),
they must act quickly and openly in pursuing any application
against an ex employee for breach of contract. These claims are
heard in the civil courts not the employment tribunals. It would be
usual for the employer to write a letter to the ex employee
requiring an undertaking that they have not committed a breach of
contract or an undertaking not to breach a post termination
restriction or an undertaking to return all company property
including any confidential information.

Proceedings

If the undertaking is not forthcoming from the ex
employee, then the employer could make an interim application to
the courts (either a County Court or the High Court) for an
injunction. An injunction is the interim remedy prior to the claim
for breach of contract being heard in the courts in the usual way.
This is a claim for all the losses that flow from the breach of
contract.

The application for an injunction is normally made with advanced
notice being provided to the ex employee but in cases where time is
of the essence for the employer, there is no obligation to provide
notice. The application at this stage will be for an injunction,
which will prevent the ex employee from breaching the post
termination restriction. A breach of a court injunction is liable
to be punishable by contempt of court proceedings (imprisonment
and/or a heavy fine) so it is in the interest of the ex employee to
ensure they are fully represented at any court hearing to try and
prevent the injunction from being granted. As injunction
proceedings are expensive (the losing party may be required to pay
the legal fees of the winning party in addition to their own), most
disputes are settled without the need to go to court as the risk of
losing vis a vis the financial costs can be serious.

Springboard relief

Even if the contract of employment contains no post termination
restrictions, injunctions can still be granted (springboard
injunctions) where there has been a breach of the contract during
the employment for example by copying confidential information such
as client lists for use in a competitor business or mass poaching
of employees/clients or to prevent ex employees dealing with
clients illicitly solicited.

If you would like to discuss your own circumstances in
confidence with an experienced solicitor, or would like a more
informal discussion about how we might be able to help you, please
call us on 0845 601 7756 or email us at info@thomasmansfield.com.

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